Big changes are taking place in Chile when it comes to energy, with a strong push for renewable energy in recent years. And there’s more to come, according to the country’s president, Sebastián Piñera.
In this edition of Columbia Energy Exchange, host Bill Loveless sits down with Susana Jiménez, Chile’s energy minister, who’s overseeing her government’s plan to change significantly the way the nation produces and uses energy. In the process, she aims to make her nation a model for not only South America but also the world.
The fifth largest consumer of energy in South America, Chile is only a minor producer of fossil fuels and therefore has relied heavily on energy imports. That’s changing, however, as Chile looks increasingly to solar, wind and other forms of renewable energy. In fact, renewable energy now accounts for about 18% of the nation’s electric power capacity, up from 5% just five years ago.
Minister Jiménez and Bill talked about this during her visit to the Center on Global Energy Policy in New York as well as her government’s plans to step up its transformation to cleaner forms of energy, all of which will require even more investment by the private sector and innovations in government regulation.
They also discussed Chile’s commitments to address climate change by reducing the carbon intensity of its economy. A good sign of that vow is her government’s agreement to host the next round of U.N. climate talks in December after Brazil reversed its plans to host the meeting.
Susana Jiménez holds a Business Degree and a Master's Degree in Economics from Pontificia Universidad Católica de Chile. She also obtained a Diploma in Free Markets from the same institution and a Master's Degree in Humanities from Universidad del Desarrollo. She has been a professor at Universidad de Chile, Universidad Central, Universidad Finis Terrae, and Pontificia Universidad Católica de Chile.
Until 1997, Ms. Jiménez was an economist with the Research Division of the Central Bank of Chile and subsequently she served as economic assistant in the representative office of the Chilean Treasury Ministry in New York. From 2000 to 2002 she was head of research at consulting firm Zahler & Co. Subsequent to that, she was an associate economist with consulting firm P. Rojas y Asociados, where she became a partner in 2009.
In May 2010 she joined the thinktank Libertad y Desarrollo (LyD) as a senior economist in charge of research on energy, environment, regulation, and free markets and water resources. She was promoted to deputy director of LyD in January 2017, a post she served in until she was appointed government minister.
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Bill Loveless: Big changes are taking place in Chile when it comes to energy with a strong push for renewable energy in recent years and there is more to come according to the country’s President Sebastián Piñera. Hello and welcome to Columbia Energy Exchange. A weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Bill Loveless. Our guest today is Susana Jiménez, Chile’s Energy Minister who is overseeing her government’s plan to change significantly the way the nation produces and uses energy and in the process become a model for not only South America but also the world. The fifth largest consumer of energy in South America, Chile is only a minor producer of fossil fuels and therefore has relied heavily on energy imports. That’s changing however as Chile looks increasingly to solar, wind and other forms of renewable energy. In fact, renewable energy now accounts for about 18% of the nation’s electric power capacity. Up from 5% just five years ago. Minister Jimenez and I talked about this during her recent visit to the Center on Global Energy Policy in New York as well as her government’s plans to step up its transformation to cleaner forms of energy. All of which will require even more investment by the private sector and innovations in government regulation. We also discussed Chile’s commitments to address climate change by reducing the carbon intensity of its economy. A good sign of that is her government’s agreement to host the next round of UN climate talks after Brazil reversed its plans to host the meeting. Well, here is our conversation. I hope you enjoy it. Energy minister Susana Jiménez, welcome to the Columbia Energy Exchange.
Susana Jiménez: Thank you very much. A pleasure.
Bill Loveless: Before we start, let’s talk a little bit about you. I know, you have a background in economics as well as in the humanities. But how did you get involved in energy?
Susana Jiménez: Well yes I studied economics and get my master degree in Chile in Universidad Catolica. And afterwards in another master in humanities, that’s right. I worked long time for the Central Bank in Chile as an economist in different consulting agencies. But the last eight years I worked as a think tank, a very important one in Chile and I was in charge of different issues, regulatory sectors and particularly on energy. So, 2017, I was working at the think tank but also with President Piñera at that time. I was macro coordinating his program. So we met there and after he won the election, he gave me the chance to be the minister of energy.
Bill Loveless: That was a pretty exciting opportunity, I would think too just given what’s going on in energy in Chile in recent years.
Susana Jiménez: Certainly. It’s a very dynamic sector. There is a lot of things happening particularly in Chile but also in the world. So, I’m very happy to lead this ministry. There is a lot to do and there are a lot of opportunities for our country in energy.
Bill Loveless: Well, it’s an exciting time in Chile for when it comes to energy. The picture on your country has changed dramatically in recent years particularly as the country has increased its reliance on renewable energy. In some sense, it’s been a transformation. Tell us about it.
Susana Jiménez: Yes. It’s a real transformation. President Pinera always says, we were very poor in the energies of the past because we import all our fuels. But we are very rich in the energy of the present and the future after we saw this huge and very quick reduction in cost of new technologies like solar and wind generation. This opened a very big opportunity for our country which has tremendous potential. Particularly, we have the highest irrigations of the world in the Northern part of our country and very good conditions for wind generation. We also have the first geothermal plant in Latin America and today, the first solar concentrated solar plant is also under construction in Chile. So, it’s a whole change in what we have seen in the past. We used to be worried about our access to energy. Our vulnerability towards international prices. But now, almost all the new investment is in this new technology with very, very competitive prices.
Bill Loveless: Yeah, the numbers are very interesting. I was taking a look and I read that again in recent years, renewable energy has reached some 18% of the electric power capacity in Chile, it was in 2018 and that’s up from just 5%, just five years earlier.
Susana Jiménez: Right. Just a couple of years ago, there was a law passed in the congress which was meant to force the entrance of this renewable, variable renewable energies in our matrix and at the end it was at 20% of the matrix for by 2025 and as you said, already on 2018, we had an 18% of generation based on this kind of renewable energy which we call non-conventional because we are not counting the bigger hydroelectricity plans. So, all the goals, we had, which we are very ambitious at the time being met in advance for example at 2015, there was a very big prospective study of where our energy sector was going and the ambition that was stated there, it was that by 2015, we had 70% of our matrix on renewable energy, counting all kind of renewable energy. And what we see today, just three four years after that, is that, that goal will be met at least 20 years in advance. That’s the velocity where we see, how things are changing in our country.
Bill Loveless: It’s so interesting. And what do you account for that quick pace that we are seeing with renewables now from a business perspective and economic perspective as well as the policy perspective?
Susana Jiménez: Well, first, it’s very important that we have had a very stable regulatory framework which hasn’t changed very much. It has had some perfections during the use but for decades, we have had a system that relies on private investment with a very clear regulation on environmental issues, security issues which is neutral from the technological point of view. So, there are no subsidies. This law, I just mentioned was an exception because normally we have left that the most competitive technology developed and this time and for good, it’s renewable energy where we have this huge potential. In Chile, we estimate that we have around 1300 gigawatt of potential of solar potential which is 75 times our whole installed capacity. It’s twice the demand of Latin America. So, there is really an opportunity for clean development in our country which is very, very attractive.
Bill Loveless: Tell me a little bit about the numbers. The cost of re newables of solar energy probably in particular. Particularly in light of the fact that you’re saying, there is no subsidy involved in this transformation that has taken place.
Susana Jiménez: Well, the last auctions, because we do have a long term auctions for a regulated clients which are households and small businesses was on 2017 and the prices of solar energy were an average around $30 per megawatt hour. We have to imagine that just six years ago, an expert panel was guessing prices would be at around $200 per megawatt hour. So, the great reduction in cost of this technology has been very, very helpful for a country with this potential hour.
Bill Loveless: And it’s been obviously tremendous investment too. Where is the investment coming from?
Susana Jiménez: Sure, there is a lot of investment for national investment. Today, from the whole plants that are under construction 93% is in renewable energy. So, the future looks renewable. But we have to do this transition because we still have a matrics where we have a 40% of coal and a little bit less than 20% of gas. So, there must be a transition which will be market forced by this competitive prices and but that will mean that we have also to have more robust and resilient transmission lines and well done projects, meaning by that not only that they are aware of the environmental regulation but also the anticipated community relationship which is also very important for its development.
Bill Loveless: I would like to talk a little bit about the five year plan that’s been implemented. It was just announced last May as I understand it by yourself and by the president. It’s a plan that will run from 2018 to 2023 and given the sort of surge in activity, you’ve seen in renewables in recent years, what do you do next?
Susana Jiménez: Well, that’s right on May, we announced this road map for energy for this administration and there are a couple of things, very important things to do. One of course is to create the conditions that this very fast renewable penetration is done with proper regards to the security of the system that means we have to have some regulatory adjustments. So to have more flexibility in our system that can give the right price signals so that the variable, renewable energy is joined by our technologies that gave a continuous and secure offer of energy to the system. But we also have other big challenges. For example in this distribution sector or segment, where we see in the whole world, I mean, Chile too a change in the dynamic between people and the energy. We are used to households to buy energy from the system but today, you can have your own production and you can sell energy to the system and during the next years, because it’s also one of the challenges we have as a government to promote electromobility, you will even be able to store it and electricity and again have this interaction with the grid which is different than we were accustomed. And that certainly needs a new regulatory framework on which we are working hard this year to have a bill of law by the end of 2029 in the congress. And we also have other challenges in Chile for example, we have in the whole central and southern part of the country, a very high air pollution problems because of the use of humid firewood and so, we are gonna present to the congress another bill of law which wants to regulate and supervise the use of solid biomass which is not only firewood which is not humid but also other products which are related like pellets and so on. So, that’s very important for our country because we do have to take care of this problem which has a direct impact on the health of our people.
Bill Loveless: Right, right, there is no escaping the environmental implications of the transition in energy whether especially, as you move to cleaner fuels and you take into consideration reliance on dirtier fuels, coal for example. But I have read where the president Piñera said, thanks to our natural conditions, we have comparative advantages necessary to be a leader in generation of new energies, new technologies. When he said that, was he referring to the tremendous potential for solar that you mentioned before?
Susana Jiménez: Yes, he certainly is thinking on our potential but also on the decarbonization process we are undergoing which is very interesting. In Chile, we as I mentioned, we have a 40% of coal energy, coal plants. So, we are working on a voluntary agreement with the companies so as to have calendar to retire or reconvert this coal plants during the next years and decades. But that’s very, very _____ [00:14:20] because it would be the first emerging country to do so with a 40% of coal plant in our matrix and with plants which are relatively new compared to other countries who have undergone this process. Our carbon plant age is more or less 12 years which compares to…
Bill Loveless: Not very old.
Susana Jiménez: 40 in the U.S. and the U.K. So, it must be a gradual process but we’re working on that and very positive. There are some lessons, I think will be very important to draw from this agreement. Basically that we can have a voluntary agreement that we can do this gradually, that we have to analyze all the impacts this may have not only on the electric system but also on the labor market, on the environment, on the health of the people and I think we are gonna have our own path but it will be very important for the world to see what will happen with that.
Bill Loveless: Yeah.
Susana Jiménez: And…
Bill Loveless: I think that’s an important point because that is the struggle. We certainly see it here in the United States where talk of closing coal fire power plants does mean a loss of some jobs and how do you accommodate that? What happens to people who are reliant on those power plants or to those coal mines and all? In Chile, how do you bring about that sort of voluntary transition? First, let me say, who owns the coal power plants?
Susana Jiménez: We have four international, three international companies and one national company which have in total 28 coal power plants. What we have done is a round table where we have heard of different experiences, studies, analysis on the social impact, environmental impact, international experiences on the impact on electricity, the electric system, its efficiency, its security, the needs for new infrastructure and based on all that information that all of us could share, because there was not only the companies that we invited, the academics, ONGs, labor unions, and local authorities. We hope to have this agreement during the first semester, half of this year.
Bill Loveless: Yeah. It’s interesting to see what will become of those power plants and those who own them now. Would these plants be transitioning to some extent to greater reliance on natural gas?
Susana Jiménez: That’s something, we have to see. What we have heard from the experts is that you can do a conversion to gas, to biomass. It may not be economically that attractive, so that’s a decision that each company will have to make when they present their own calendar.
Bill Loveless: Do you see more, a greater reliance on natural gas? I’m not sure what the total reliance is right now in Chile but the country does rely on gas or certain part of its electric power generation.
Susana Jiménez: Yes, right. It’s about 17% of the matrix and probably gas will have a role to play in this transition towards more renewable energy specially, when we think about variable renewable energy as well as other technologies which should enter into our system like batteries or pump storage but certainly we do think there is a space, an important space for gas during this transition.
Bill Loveless: Right. Chile gets most of its gas now from Trinidad and Tobago.
Susana Jiménez: Yes. But the good news is that we have been deepening our integration with Argentina. We used to buy gas from Argentina until 2007 when this input seized because our neighbor didn’t have enough gas for internal use. They had the lack of investment but today, knowing that they have the second biggest reserve of gas in _____ [00:18:46], they reserve back on what they may have heard about it. We are been working with Argentinean government to again integrate our countries. We do have transport lines and we already have some contracts to exchange this gas which is a big opportunity for our country to since we had to construct this LNG plants to gasify the resources, we are bringing for country which are much farther and of course, for the competitive prices that we could access with Argentina supply it is a good deal for them and for us.
Bill Loveless: And there is some gas too coming from the United States.
Susana Jiménez: Yes, indeed.
Bill Loveless: And do you think that might _____ [00:19:44] I believe. Isn’t it…
Susana Jiménez: Yes and during the next years, we will still need that because Argentina is doing its own investments in their gas exploration. But they still need to have more production to have enough supply for their own demand. So, by now, we have contracts that are for eight months a year. We hope by 2021, they will have enough production so that we can buy the whole year from Argentina at competitive prices. Which is good news especially not just for electric generation but also for other uses like industrial uses and at households that today use firewood and could change if the price is competitive enough to this other energy source.
Bill Loveless: Now, one of the things I find, I mean, I think the whole story of energy transition in Chile is so interesting. But I’m particularly interested in sort of the next stages, because you really are talking about how individuals use energy and how they think differently about energy and it would strike me as that is one of the more challenging issues for you as how do you tell that story to people, the consumers in your country, how do you bring about that kind of change where you see maybe more distributed options with solar, whatever or you see different right making options to urge people to use energy in different ways. How do you go about doing that?
Susana Jiménez: Well, there is some concrete steps we have been doing which are much closer to the people, to the customers than it was this huge revolution on the generation side at big scale. Today, for example, like a couple of months ago, we passed a law for expanding the distributed generation to households or industries up to 300 kilowatts of capacity. So, we expect this will be increasing we are also on whole process of technological change with smart meters, which will allow people to produce at home and sell this energy to the grid. And also we are undergoing a big revolution on the public transport, we have today, the biggest fleet of electric buses in the public transport system, the whole Latin America. So, I think people are feeling by now that their relation to energy is changing. They’re using buses that are electric. No noise, no pollution. They are seeing more and more houses that can have their own production with like solar panels and electric mobility at the private sector is growing fast. It’s still very small in our country. We have not much vehicles but in our road map, we also have some goals of multiplying by 10 the vehicles we see on our streets by the end of this administration. So, we are working very close to the private sector, doing good collaborations to see the whole charging stations expanding. We will be in the whole country, in every region, this year and we are also working with the educational institutions, so that people can learn about this technologies which will be important, labor source for the future generations.
Bill Loveless: Interesting. Let’s talk climate change a little bit. What impact does climate change is having this Chile?
Susana Jiménez: Well Chile is one of the countries that is very vulnerable to climate change from the energy sector, it’s a risk for our hydroelectric source certainly. And of course, we are very committed to work for the gas house, greenhouse emissions for this next cup which will be hosting Chile at the end of this year. I think, the energy sector has a lot to do for that. I think the decarbonization process in the electric generation sector and in the transport will be a huge step towards reaching our compromise which is to reduce 30% our emission in pan city by 2013 and it could even be more for the following years, if we keep this track in the energy sector.
Bill Loveless: And of course, you mentioned the UN meeting on climate change. It was to be held in Brazil. Brazil has now declined that opportunity to host. Chile stepped in. The meeting is scheduled for December. There is some talk maybe it will be postponed where does that stand right now?
Susana Jiménez: No, at the beginning, Chile proposed that it should be on January since we took this opportunity for this year but just with one year in advance but it was decided that it will be in December. We’re also hosting a _____ [00:25:34] in November. So, it’s a lot to do in our country but we are very happy to host this event. We are very committed and we expect a lot of this meeting at the end of the year.
Bill Loveless: That’s a big statement for your country, for your government to take on that opportunity, to take on this meeting, so quickly.
Susana Jiménez: Certainly and I think that the energy sector will be one of the good news of our summit.
Bill Loveless: Do you see, I mean, just from looking as we talk about this, I think, you see a lot, obviously, you see a lot of opportunity there in the need to address climate change but also the opportunity it creates for new technology and all. But there is also with the potential conflict there is you make these adjustments to a new and different economy in your country. I mean, how big of a challenge is.
Susana Jiménez: Well, the challenges are big because the transition is going on very fast. So, challenges are probably on the regulatory side, very important as I mentioned we need to have more flexibility in our system. And we need to have more transmission infrastructure as long as we keep replacing not only the coal fire plants but also a growing electric demand. Chile still has like half of the electric intensity use as the average of the OECD. So, demand will keep growing and we have to respond to that requirements. So, I see a lot of interest from the private sector, from foreign investors and national investors and we have the obligation to give stability on the regulation and keep all the conditions that investment is really attracted by our country. Energy will be the second most important sector for private investment during the following five years. So, there will be a lot going on in our country.
Bill Loveless: And you mentioned stability too, I mean, there has been stability when it comes to energy policy even with change in governments.
Susana Jiménez: Yes, absolutely. We have had very solid regulation for decades which has had some perfections, some new requirements which are in tune with the needs of the country, with the needs of the world, particularly in environmental issues and so, I think that the experience for investors has been good in Chile. We have had a very good performance of the electric services. We have almost 99.9% of people with access to electricity which is a lot for the average emerging countries development. But I think we can do more now that we have this alternative of having renewable sources which are our own, which can be given to electrify the, even the most farthest people in the mountains, in our islands who may have still a very vulnerable situation towards energy and now, we have this opportunity to give them a solution with renewable energy.
Bill Loveless: Before we close, I just want to ask you. You’ve been looking at these sorts of issues for many years in private practice, in your other positions, professionally over the years. If you went back ten years ago, I mean, would you have anticipated there could have been as much change taking place in Chile today?
Susana Jiménez: No, I think nobody could have guessed that this would be so fast and we had a mixed commission by 2012 and as I said before, the estimate for prices in solar energy, wind energy were far from what they are now. So, nobody expected this technological change and it’s just good news for us. It’s an opportunity to explore our potential, to have access to cheaper energy and why not to think about exporting our clean energy to our neighbor countries where we are working on to have interconnections to the rest of the region.
Bill Loveless: I’m glad you mentioned the interconnections because I think that’s a big topic for you too, right. Regional, that regional approach to energy. What is taking place there in terms of discussion that your government has with other governments?
Susana Jiménez: Yes, with Argentina, we have been working a lot as I mentioned, we are integrating with the gas trade but also we have one electric interconnection line between both countries. But we have done a huge study which is in its final stage which is analyzing different other alternative, interconnection lines and where we already know we have at least one more which would be economically attractive to construct. So, we are in this final stage. We need still to have some other studies for the electric impact. But I think we can go for, we can advance on that and there is the political will of both countries to deepen our integration. With Peru, we do not have any connection by now but we have two lines under study and hopefully, we will have some advances there too. There we need to have some harmonization on our regulatory frameworks. So, we hope that we will be keep going on. We have met with the Peruvian government too and we all think that it is important to have more interconnection in our region?
Bill Loveless: From everything you’ve told me, minister today, it seems like we need to keep a close eye on Chile going forward when it comes to energy not only in your country but certainly throughout the region.
Susana Jiménez: Certainly and we are happy that this is happening because we think this will be good for our people, for our economic activity and certainly for investment in our country.
Bill Loveless: Energy Secretary Susana Jiménez. Thank you for joining us today in the Columbia Energy Exchange.
Susana Jiménez: Thank you very much.
Bill Loveless: Well, that’s our conversation. I hope you enjoyed it. For more on the Columbia Energy Exchange and the Center on Global Energy Policy, go to our webpage at Energypolicy.columbia.edu or find us on social media at Columbiauenergy. If you have a minute give us a rating and leave us a comment too on your favorite podcast platform. For the Columbia Energy Exchange, I’m Bill Loveless. We’ll be back again next week with another conversation.